Here’s how you read the chart:
• The upper end of each squiggly line is the first Wall Street consensus estimate; the bottom of each line is the last.
• Note that for 2016 (the orange line), the first estimate was for $137 earnings per share on the S&P 500 Index, and the last was for $106. That’s a big miss.
• Also note that 2016 may end lower than the actual earnings for 2013 (the black line).
We use median P/E because analysts have historically been too optimistic in their earnings forecasts. This is why we don’t – and don’t believe you should – trust Wall Street estimates.
Another GREAT post from John Mauldin, read the entire article HERE.